By John Lyon
Arkansas News Bureau
LITTLE ROCK — Members of a legislative panel that oversees Arkansas’ lottery Tuesday questioned whether the startup process is moving too quickly.
At a hearing to review a proposed contract with Athens, Greece-based Intralot to run drawing games for the lottery, members of the Arkansas Lottery Commission Legislative Oversight Committee asked as many questions about the lottery’s startup date as they did about the contract. The committee ultimately took no action on the contract, deciding to delay its review until its next meeting on Thursday.
Lottery Director Ernie Passailaigue has said the lottery can start by Sept. 28, about a month ahead of the Oct. 29 target date the Arkansas Lottery Commission previously announced. He told legislators Tuesday that a September start date would set a world record.
Lawmakers questioned whether quality and public confidence in the lottery would be sacrificed for the sake of speed.
“It appears we are rushing to implement this process,” said Rep. Linda Tyler, D-Conway. “The perception of Arkansans, as I’m hearing, (is) that we’re rushing too fast.”
Passailaigue said the Sept. 28 date was Intralot’s idea, not his, but he believes it can be achieved without sacrificing quality. Every day the lottery is not in operation means fewer scholarships for students, he said.
“Our goal is to have the earliest possible startup date but run it with the security and integrity that we consider appropriate,” Passailaigue said. “That will happen here in Arkansas. We can’t wait to turn on the switch.”
“I can’t wait either, but I do want to turn it on right,” Tyler said.
The first lottery-funded scholarships will be awarded for the 2010-11 school year. Rep. Bruce Maloch, D-Magnolia, said Arkansas already has more than $40 million in surplus scholarship money.
Maloch also said that when the Legislature sets scholarship amounts next year it will do so based on expectations of future revenue, not on what’s in the bank at that time.
“I’m not certain that a few days’ difference would change the number of scholarships that we’re going to issue,” he said.
Sen. Tracy Steele, D-North Little Rock, said he wanted to see a specific plan to encourage participation by minority-owned businesses. Other lawmakers questioned whether Intralot, the only bidder for the contract, had submitted a proposal that was competitive.
Intralot has asked for 2.45 percent of net ticket sales. Ray Thornton, chairman of the Arkansas Lottery Commission, said that of the five states neighboring Arkansas that have lotteries, all but Tennessee pay their vendors higher percentages.
Rep. Darrin Williams, D-Little Rock, said the South Carolina Education Lottery, formerly headed by Passailaigue, pays its vendor a flat fee of $6.7 million a year. Arkansas will pay Intralot $8.9 million a year if the lottery collects $1 million in gross ticket sales per day, he said.
Passailaigue said Arkansas’ proposed contract with Intralot covers services and products that are not in South Carolina’s contract with in its vendor, Scientific Games of Alpharetta, Ga., such as ticket vending machines.
Also, paying the vendor a percentage of ticket sales rather than a flat fee places the risk on the vendor, not the state, in the event that ticket sales fall below projections, Passailaigue said.
“We have to look out for the taxpayers here,” he said.
Rep. Barry Hyde, D-North Little Rock, the committee’s House chairman, asked if Intralot is required to have a data center operating in Arkansas by Sept. 28. Lottery Procurement Director Bishop Woosley said Intralot plans to have a data center ready in Maumelle by that date, but if the center is not ready in time the company will use a backup facility in South Carolina.
“If we’re going to get started before the data center can be ready, that certainly supports this comment that’s been made more than once that, gee whiz, are we going a little too fast?” Hyde said.
Talking to reporters after the hearing, Passailaigue said he does not believe the startup process is moving too quickly, but he said lottery officials would bow to the will of the legislative oversight committee.
“If they tell us to push it back or month or two, I guess we’d have to push it back a month or two,” he said.
